UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE VERMONT TEDDY BEAR CO., INC.
Elisabeth B. Robert, President, The Vermont Teddy Bear Co., Inc.
6655 Shelburne Road, Shelburne, VT 05482, (802) 985-1300
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copy to: Spencer R. Knapp, Esquire, Dinse, Knapp & McAndrew, P.C.,
209 Battery Street, Burlington, VT 05402
Approximate date of commencement of proposed sale to the public:
from time to time after this Registration Statement becomes effective
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registrations statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
Calculation of Registration Fee
<S> <C> <C> <C> <C>
Title of each class Amount to be Proposed Proposed Amount
of securities to be registered(1) maximum maximum regis-
registered ------------ offering aggregate tration
- ------------------- price per offering fee
unit(2) price(2) -------
--------- ---------
Common Stock, 1,897,251 $4.07815 $7,737,274.17 $2,150.96
par value $.05 shares
per share
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Regsistrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8 (a)of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to section 8(a) may determine.
<PAGE>
PROSPECTUS, Subject to Completion, dated November 15, 1999
THE VERMONT TEDDY BEAR CO., INC.
1,897,251 shares of Common Stock
These shares of common stock are being offered and sold from time to time
by certain of our current shareholders.
The selling shareholders may sell the shares from time to time at fixed
prices, market prices, prices computed with formulas based on market prices, or
at negotiated prices, and may engage a broker or dealer to sell the shares. For
additional information on the selling shareholders' possible methods of sale,
you should refer to the section of this prospectus entitled "Plan of
Distribution" on page 6. We will not receive any proceeds from the sale of the
shares, but will bear the costs relating to the registration of the shares.
Our common stock is traded on the Nasdaq market under the symbol "BEAR."
On November 11, 1999, the closing price for our common stock was $4.0313 per
share.
--------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the shares, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------------------------------------
The date of this Prospectus is __________________.
</PAGE>
<PAGE>
TABLE OF CONTENTS
Section Page
- --------- -----
Business of the Company 3
Selling Shareholders 4
Plan of Distribution 6
Experts 8
Limitation of Liability and Indemnification 8
Information Incorporated by Reference 8
Available Information 9
You should rely only on information contained or incorporated by reference
in this prospectus. See "Information Incorporated by Reference" on page 6.
Neither the Company nor the selling shareholders have authorized any other
person to provide you with information different from that contained in this
prospectus.
The shares of common stock are not being offered in any jurisdiction where
the offering is not permitted.
The information contained in this prospectus is correct only as of the date
on the cover, regardless of the date this prospectus was delivered to you or the
date on which you acquired any of the shares.
</PAGE>
BUSINESS OF THE COMPANY
Founded in 1981 and incorporated in 1984, The Vermont Teddy Bear Co., Inc.
(the "Company"), with its principal offices located at 6655 Shelburne Road,
Shelburne, Vermont, is a designer, manufacturer, and direct marketer of teddy
bears and related products.
The Company's primary business segments are its Bear-Gram delivery
business, its retail business and its wholesale business. The largest of the
Company's business segments is the Bear-Gram gift delivery service comprising
84.0 percent of the Company's total business for the fiscal year ended June 30,
1999. The Company's retail store operations represented 11.2 percent of net
revenues, and wholesale, corporate affinity, and licensing programs together
were 4.8 of net revenues for the fiscal year ended June 30, 1999.
The Bear-Gram delivery service involves sending personalized teddy bears
directly to recipients for special occasions such as birthdays, anniversaries,
weddings, and new births, as well as holidays such as Valentine's Day,
Christmas, and Mother's Day. Through this service the Company offers teddy
bears in a variety of sizes and colors, as well as approximately 100 different
teddy bear outfits to further customize the teddy bear. Every Bear-Gram gift
includes a customized teddy bear made in its Shelburne, Vermont factory, which
can be further personalized with embroidery on the outfit, a candy treat, and a
personal message on a card all delivered in a colorful box with an "airhole".
Orders for the Bear-Gram delivery service are generally placed by calling a
toll-free telephone number (1-800-829-BEAR) and speaking with Company sales
representatives, called Bear Counselors. An increasing number of orders,
however, are being placed by customers online at the Company's website with
twenty-five percent of total orders in the Bear-Gram gift delivery service
segment placed on line during the month of June 1999, versus ten percent in June
1998. Orders placed by 4:00 p.m. can be shipped the same day; packages are
delivered primarily via Federal Express and other carriers by next-day air, two-
day air or United States Postal Service Priority Mail.
The Company's Bear-Gram segment sales are heavily seasonal, with Valentine's
Day, Christmas, and Mother's Day as the Company's largest sales seasons.
The retail operations business segment was second only to the Bear-Gram
delivery service segment in its contribution to the Company's total sales in the
fiscal year ended June 30, 1999, at 11.2 percent of net revenues. During 1997
and 1998, the Company had placed a greater emphasis on retail operations
operating Company-owned retail stores in North Conway, New Hampshire, Freeport,
Maine and on Madison Avenue in New York City, in addition to its factory store
in Shelburne, Vermont. The contribution of all retail operations was 18% of net
revenues for the fiscal year ended June 30, 1998.
Due to continued unprofitability in the satellite stores, the Company began
to reverse its retail expansion strategy during its fiscal year ended June 30,
1998, closing its New York City store on December 7, 1997. The remaining
satellite stores were closed during the fiscal year ended June 30, 1999. The
Freeport, Maine store was closed in August 1998 and the North Conway, New
Hampshire store was closed in October 1998. The Company's very successful
factory retail store is the only retail location which remains in operation.
The Company actively promotes family tours of its teddy bear factory and store
at the factory location in Shelburne, located ten miles south of Burlington,
Vermont. The factory drew over 103,000 visitors in the twelve-month period ended
June 30, 1999, and has drawn more than 493,000 visitors since moving to its new
location in July 1995. In an effort to make a visit to the factory more
entertaining and draw additional traffic, the Company has implemented the Make
A-Friend-For-Life bear assembly area, where visitors can participate in the
creation of their own teddy bear.
During its fiscal year 1998, the Company began pro-actively developing
opportunities in the corporate affinity market and certain wholesale markets as
a business segment. The Wholesale/Corporate business segment accounted for 4.8%
of net revenues for fiscal year ended June 30, 1999, and is the fastest growing
segment of the Company's business. While numerous corporate affinity programs
involve the Company's Vermont Teddy Bear brand bear, manufactured at the
Shelburne, Vermont factory, the largest orders involve teddy bear products which
were designed by the Company and manufactured off shore. The Company also sells
wholesale its Make-A Friend for Life teddy bears designed and imported by the
Company to Zany Brainy, Inc., an educational toy store chain based in King of
Prussia, Pennsylvania. Zany Brainy's retail customers participate in the making
of their own teddy bear in the Make-A-Friend-for-Life kiosks in select Zany
Brainy locations.
SELLING SHAREHOLDERS
Based upon information supplied to the Company by each selling Shareholder,
the following table sets forth certain information as of October 22, 1999,
regarding the beneficial ownership of the common stock held by each selling
shareholder. Fractional shares have been rounded down to the nearest whole
share.
Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Except as indicated, each person possesses sole voting and investment power with
respect to all of the shares of common stock owned by such person, subject to
community property laws where applicable.
<TABLE>
<S> <C> <C> <C>
Selling Shares Owned Shares Being Ownership After Offering
Shareholder Prior to Offered If All Shares
- ----------- Offering ------------ Hereby Are Sold
------------ ------------------------
Number Percent(%) Shares Percent (%)
(i)3:
J. Bacon 70,840 1.121 22,670 48,170 .762
E. Cronin 28,029 .443 28,029 -0- -0-
J. Crowl 37,669 .596 22,670 14,999 .237
Split Rock
Fund LLC 22,670 .359 22,670 -0- -0-
D. Granquist 50,949 .806 26,950 23,999 .380
S. Hunt 34,669 .548 22,670 11,999 .190
W. King 32,669 .517 22,670 9,999 .158
C. Kireker 23,618 .374 17,619 5,999 .095
Kireker Trust 63,723 1.008 36,724 26,999 .427
C. K. Smith 45,341 .717 45,341 -0- -0-
L. Orton 326,712 5.168 226,712 100,000 1.582
D. Boardman 22,670 .359 22,670 -0- -0-
A. Horowitch 2,318 .037 2,318 -0- -0-
(ii):
Green Mountain
Capital,
L.P. (4) 100,000 1.582 100,000 -0- -0-
(iii):
URSA(VT)QRS
12-30,
Inc.(5) 193,111 3.055 193,111 -0- -0-
(iv):(6)
Candlish Trust
(4/3/91) 54,221 .858 54,221 -0- -0-
E. Kozlowski 72,295 1.144 72,295 -0- -0-
</TABLE>
<TABLE>
<S> <C> <C> <C>
Selling Shares Owned Shares Being Ownership After Offering
Shareholder Prior to Offered If All Shares Offered
- ----------- Offering ------------ Hereby Are Sold
------------ ---------------------- Percent
Percent
Number (%) Shares Percent (%)
S.Z. Lee 27,111 .429 27,111 -0- -0-
Schiff Lee Trust 27,111 .429 27,111 -0- -0-
C. Robins,
Custodian 27,111 .429 27,111 -0- -0-
D. Lucas 135,554 2.144 135,554 -0- -0-
S.D. McCullough 18,073 .286 18,073 -0- -0-
R. Perkins 36,147 .572 36,147 -0- -0-
R. Rossetti 72,295 1.144 72,295 -0- -0-
S. Schoen 45,184 .715 45,184 -0- -0-
C. Smith 36,147 .572 36,147 -0- -0-
S. Oberg 5,422 .086 5,422 -0- -0-
J.S. Surface 5,422 .086 5,422 -0- -0-
S. Marsh 10,844 .172 10,844 -0- -0-
D. Jones
I/JL Cust. 45,184 .715 45,184 -0- -0-
M.G. Thompson 100,607 .801 50,607 50,000 .791
W. Watts 54,221 .858 54,221 -0- -0-
Shepherd Venture
Fund 225,383 3.565 225,383 -0- -0-
Shepherd Group
LLC 2,276 .036 2,276 -0- -0-
T.R. Shepherd 112,131 1.774 112,131 -0- -0-
T.N. Shepherd 21,688 .343 21,688 -0- -0-
</TABLE>
None of the selling shareholders has held any positions or office or had
any other material relationship with the Company or any of its affiliates within
the past three years, except J. Bacon, T.R. Shepherd and T.N. Shepherd, who are
currently serving on the Board of Directors.
In recognition of the fact that the selling shareholders may wish to be
legally permitted to sell their shares when they deem appropriate, the Company
agreed with the selling shareholders to file with the SEC, under the Securities
Act, a registration statement on Form S-3, of which this prospectus forms a
part, with respect to the resale of the shares.
PLAN OF DISTRIBUTION
The shares offered by this prospectus may be sold from time to time by the
selling shareholders or by their pledgees, donees, transferees or other
successors in interest. Sales may be made on one or more exchanges or in the
over-the-counter market, in privately negotiated transactions, through the
writing of options on the shares, or otherwise at market prices then prevailing
or at prices related to the then-current market price, at fixed prices that may
be changed, or at negotiated prices. Any shares covered by this prospectus that
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under
such Rule rather pursuant to this prospectus.
The shares may be sold to or through brokers or dealers, who may act as
agent or principal, or in direct transactions between the selling shareholders
and purchasers. In addition, the selling shareholders may, from time to time,
sell short the common stock, and in such instances this prospectus may be
delivered in connection with such short sale and the shares offered hereby may
be used to cover the short sale.
Transactions involving brokers or dealers may include (a) ordinary
brokerage transactions, (b) transactions in which the broker or dealer solicits
purchasers, (c) block trades in which the broker or dealer will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction, and (d) purchases by a broker or dealer
as a principal and resale by such broker or dealer for its account. In
effecting sales, brokers and dealers engaged by the selling shareholders or from
the purchasers of the shares may arrange for other brokers or dealers to
participate. Participating brokers or dealers may receive discounts,
concessions or commissions from the selling shareholders, the purchasers of the
shares for whom such broker or dealer may act as agent or to whom they may sell
as principal. Any such compensation payable to a broker or dealer may exceed
customary commissions. The selling shareholders and such brokers and dealers
who act in connection with the sale of shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by them
and any profit on any resale of the shares as principal may be deemed to be
underwriting discounts and commissions under the Securities Act.
In connection with distributions of the common stock, the selling shareholders
may enter into hedging transactions with brokers or dealers and the brokers or
dealers may engage in short sales of the common stock in the course of hedging
the positions they assume with the selling shareholders. The selling
shareholders also may enter into option or other transactions with brokers or
dealers that involve the delivery of the common stock to the brokers or dealers,
who may then recall or otherwise transfer such common stock. The selling
shareholders also may loan or pledge the common stock to a broker or dealer and
the broker or dealer may sell the common stock so loaned or upon default may
sell or otherwise transfer the pledged common stock.
The Company is bearing all costs relating to the registration of the
shares. Any commissions, discounts or other fees payable to brokers or dealers
in connection with any sale of the shares will be borne by the selling
shareholders, the purchasers of the shares, or both. The Company will receive
none of the proceeds from the sale of the shares by the selling shareholders.
The Company and the selling shareholders each have agreed to indemnify the other
against certain liabilities, including liabilities arising under the Securities
Act, that relate to statements or omissions in the registration statement of
which this prospectus forms a part.
EXPERTS
The balance sheets of The Vermont Teddy Bear Co., Inc. as of June 30, 1998,
and June 30, 1999, and the related statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended June 30,
1999, incorporated by reference into this prospectus, have been audited by
Arthur Andersen LLP, independent auditors, as stated in their reports with
respect thereto. Such financial statements have been so incorporated in
reliance on the reports of such firm given upon their authority as experts in
accounting and auditing.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Amended and Restated Articles of Incorporation provide that,
to the fullest extent permitted by the New York Business Corporation Act, the
Company's directors will not be liable for monetary damages to the Company or
its shareholders, excluding, however, liability for acts or omissions involving
intentional misconduct or knowing violations of law, illegal distributions or
transactions from which the director receives benefits to which the director is
not legally entitled. The Company's Amended and Restated Bylaws provide that
the Company will indemnify its directors and, by action of the Board of
Directors, may indemnify its officers, employees and other agents of the Company
to the fullest extent permitted by applicable law, except for any legal
proceeding that is initiated by such directors, officers, employees or agents
without authorization of the Board of Directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" certain of our publicly-
filed documents into this prospectus, which means that information included in
those documents is considered part of this prospectus. Information that we file
with the SEC subsequent to the date of this prospectus will automatically update
and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the selling
shareholders have sold all the shares.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our Annual Report on Form 10-KSB for the year ended June 30, 1999,
and Quarterly Report for the period ended September 30, 1999;
2. The description of our common stock set forth in our Registration
Statement on Form SB-2 (Registration No. 33-69898), including any
amendment or report filed for the purpose of updating such
description, as incorporated by reference in our Registration
Statement on Form 8-A.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, other than exhibits to
such documents. You should direct any requests for documents to Investor
Relations, The Vermont Teddy Bear Co., Inc., 6655 Shelburne Road, Shelburne, VT
05482, telephone (802) 985-3001.
The information relating to the Company contained in this prospectus is not
comprehensive and should be read together with the information contained in the
incorporated documents.
AVAILABLE INFORMATION
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the SEC. Certain information in the Registration Statement has been
omitted from this prospectus in accordance with SEC rules.
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy the Registration Statement and any other
document that we file at the SEC's public reference rooms located at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549; 7 World Trade
Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60662. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's web site at
http://www.sec.gov or through our web site at http://www.vtbear.com.
Statements contained in this prospectus as to the contents of any contract
or other document referred to are not necessarily complete and in each instance
you should refer to the copy of such contract or other document filed as an
exhibit to the Registration Statement.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses in connection with the issuance and distribution of the
securities being registered will be paid by the Company. The following is an
itemized statement of these expenses (all amounts are estimated except for the
SEC and Nasdaq listing fees):
SEC Registration fee $ 2,150.96
Nasdaq listing fee $ 0.00
Legal fees $ 10,000.00
Accountant's fees $ 2,000.00
Printing fees $ 500.00
Miscellaneous $ 500.00
Total $ 15,150.96
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article VI of the Company's Amended and Restated Articles of Incorporation
and Article XI of the Company's Amended and Restated Bylaws permit
indemnification of directors, officers, employees and agents of the Company to
the fullest extent permitted by the New York Business Corporation Law (the
"Act"). Sections 721 through 726 of the Act authorize a court to award, or a
corporation's board of directors to grant, indemnification to directors and
officers on terms sufficiently broad to permit indemnification under certain
circumstances for liabilities arising under the Securities Act.
EXHIBITS
3.1 Amended and Restated Articles of Incorporation of the Company7
3.2 Amended and Restated Bylaws of the Company8
4.1 Form of Warrant, dated July 10, 1997 issued to URSA(VT)QRS 12-30,
Inc.9
4.2 Form of Warrant, dated November 3, 1998, issued to URSA(VT)QRS 12-
30, Inc.10
4.3 Form of Warrant, dated November 3, 1998, issued to holders of Series
C Convertible Redeemable Preferred Stock11
5 Opinion on Legality
23 Consent of Arthur Andersen, LLP
24 Power of Attorney (included on signature page hereof)
UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement.
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof)
that, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of an action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question, whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Shelburne, State of Vermont, on November 11, 1999.
THE VERMONT TEDDY BEAR CO., INC.
By: /s/ Elisabeth B. Robert
Elisabeth B. Robert, President
KNOW ALL BY THESE PRESENTS that each person whose signature appears below hereby
authorizes and appoints Elisabeth B. Robert as his/her true and lawful attorney-
in-fact and agent to act in his/her name, place and stead and to execute in the
name and on behalf of each file, any and all amendments to this Registration
Statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 10th day of November, 1999:
______________________________
Jason Bacon, Director
/s/ Fred Marks
Fred Marks, Director and Chairman of the
Board
______________________________
Barbara Johnson, Director
/s/ Spencer C. Putnam
Spencer C. Putnam, Director
/s/ Elisabeth B. Robert
Elisabeth B. Robert, Director, President,
Treasurer, Chief Executive Officer and
Chief Financial Officer
/s/ Thomas Shepherd
Thomas Shepherd, Director
/s/ Nathaneal Shepherd
T. Nathaneal Shepherd, Director
/s/ Robert H. Hamilton
Robert H. Hamilton, Director
Dinse, Knapp & McAndrew, P.C.
ATTORNEYS AT LAW
November 11, 1999
Board of Directors
The Vermont Teddy Bear Co., Inc.
Shelburne, VT 05482
Ladies and Gentlemen:
We have acted as counsel to the Vermont Teddy Bear Co. (the "Company") in
connection with the registration under the Securities Act of 1933 as amended of
1,897,251 shares of the Company's common stock (the "Shares") by the
registration statement, dated November 11, 1999, on Form S-3 (the "Registration
Statement"). As counsel, we are familiar with the corporate proceedings
relative to the incorporation of the Company and the registration and issuance
of the Shares. Based upon the foregoing and having due regard for legal
considerations as we deemed relevant, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly existing under
the laws of the State of New York , with full corporate power to issue the
Shares, the warrants referred to in the registration statement (the "Warrants"),
and the shares of Series C Convertible Redeemable Preferred Stock referred to in
the Registration Statement (the "Series C Preferred Stock").
2. The Shares which are presently issued and outstanding have been duly
authorized by appropriate corporate action and are validly issued, fully paid
and non-assessable.
3. The Shares issuable upon exercise of the Warrants and upon conversion of
the Series C Preferred Stock have been duly authorized and reserved for such
purpose by appropriate corporate action. Upon issuance of Shares following due
exercise of Warrants or conversion of Series C Preferred Stock, all such shares
will be validly issued, fully paid and non-assessable.
Very truly yours,
DINSE, KNAPP & McANDREW, P.C.
/s/ Dinse, Knapp & McAndrew, P.C.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 of The Vermont Teddy Bear
Co., Inc. of our report dated August 20, 1999, relating to the balance sheet of
The Vermont Teddy Bear Co., Inc. as of June 30, 1999, and the related statements
of operations, stockholders' equity, and cash flows for the year ended, which
report appears in the June 30, 1999 annual report on Form 10-KSB of The Vermont
Teddy Bear Co., Inc. It should be noted that we have not audited any financial
statements of the Company subsequent to June 30, 1999.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 10, 1999
Pursuant to Rule 416 under the Securities Act of 1933, there are also
being registered such indeterminate number of additional shares of Common Stock
as may be issuable upon exercise of the Common Stock purchase warrants described
herein pursuant to the provisions thereof regarding adjustment for stock
dividends, stock splits or similar events.
Of the shares being registered hereby, 588,562 shares are issuable upon
conversion of Series C Preferred Stock at a conversion price of $1.05 per share,
and 688,967 shares are issuable upon the exercise of outstanding common stock
purchase warrants at an exercise prices ranging from $1.05 to $1.31 (as of June
30, 1999).
3 The following persons own shares acquired upon conversion of the Company's
Series B Convertible Preferred Stock on February 3, 1999, and upon exercise of
warrants in July, 1999, issued in connection with the Series B Preferred Stock.
The shares purchased upon exercise of the warrants are offered hereby.
4 Green Mountain Capital, L.P. acquired 100,000 shares on November 5, 1999.
5 USRA (VT) QRS 12-30, Inc. holds two warrants to purchase 150,611 shares
and 42,500 shares, respectively, which have not expired as of the date of this
Prospectus.
6 The following persons are holders of the Company's Series C Convertible
Preferred Stock (the "Series C Preferred Stock") and related warrants. Shares
offered hereby include 588,562 shares issuable upon conversion of Series C
Preferred Stock and 495,856 shares issuable upon exercise of the related
warrants.
7 Incorporated by reference to Exhibits 3.5 of the Company's Forms 10-KSB and
10-QSB for the year ended June 30, 1999, and period ended September 30, 1999,
commission file number 1-12580, filed with the Commission on September 28, 1999,
and November 15, 1999, respectively.
8 Incorporated by reference to Exhibits 3.6 of the Company's Forms 10-KSB and
10-QSB for the uear ended June 30, 1999, and period ended September 30, 1999,
commission file number 1-12580, filed with the Commission on September 28, 1999,
and November 15, 1999, respectively.
9 Incorporated by reference to Exhibits 4.7 of the Company's Forms 10-KSB and
10-QSB for the year ended June 30, 1999, and period ended September 30, 1999,
commission file number 1-12580, filed with the Commission on September 28, 1999,
and November 15, 1999, respectively.
10 Incorporated by reference to Exhibits 4.12 of the Company's Forms 10-KSB and
10-QSB for the year ended June 30, 1999, and period ended September 30, 1999,
commission file number 1-12580, filed with the Commission on September 28, 1999,
and November 15, 1999, respectively.
11 Incorporated by reference to Exhibits 4.11of the Company's Forms 10-KSB and
10-QSB for the year ended June 30, 1999, and period ended September 30, 1999,
commission file number 1-12580, filed with the Commission on September 28, 1999,
and November 15, 1999, respectively.
